Sipple v. City of Hayward

Citation225 Cal.App.4th 349,170 Cal.Rptr.3d 199
Decision Date08 April 2014
Docket NumberB242893
PartiesDonald SIPPLE et al., Plaintiffs and Appellants, v. CITY OF HAYWARD et al., Defendants and Respondents.
CourtCalifornia Court of Appeals


See 3 Witkin, Cal. Procedure (5th ed. 2008) Actions, § 253.

APPEAL from a judgment of the Superior Court of Los Angeles County. William F. Highberger, Judge. Reversed and remanded with directions in part, and affirmed in part. (Super. Ct. No. BC462270)

Morris and Associates, Stephen B. Morris, San Diego; Bartimus, Frickleton, Robertson & Gorny, James P. Frickleton, Leawood, Edward D. Robertson, Jr., Jefferson City, for Plaintiffs and Appellants Donald Sipple, John Simon, Karl Simonsen and Christopher Jacobs.

Doyle Law, Conal F. Doyle for Plaintiff and Appellant New Cingular Wireless PCS LLC.

Jarvis, Fay, Doporto & Gibson, Benjamin P. Fay, Oakland, Andrea J. Saltzman, Berkeley, Rick W. Jarvis, Oakland, for Defendants and Respondents City of Hayward, City of Modesto, City of Palo Alto, City of Redwood City, City of San Luis Obispo and City of Santa Barbara.

Colantuono & Levin, Los Angeles, Michael G. Colantuono, Holly O. Whatley, Amy C. Sparrow for Defendants and Respondents Alhambra Coalition.

Richards, Watson & Gershon, Lisa Bond, Andrew Brady, Los Angeles, for Defendants and Respondents Cities of Compton, Hawthorne, Long Beach and Redondo Beach.

Meyers, Nave, Riback, Silver & Wilson, Deborah J. Fox, Los Angeles, Peter S. Hayes, Mary C. Tsai, Oakland, for Defendants and Respondents City of Desert Hot Springs, Downey, El Cerrito, Pasadena, Pinole and San Leandro.

Barbara J. Parker, City Attorney, Doryanna Moreno, Chief Assistant City Attorney, William E. Simmons, Kathleen Salem–Boyd, Christopher Kee for Defendant and Respondent City of Oakland.

Dennis J. Herrera, City Attorney, Julie Van Nostern, Chief Tax Attorney, Peter J. Keith, Deputy City Attorney for Defendant and Respondent City and County of San Francisco.

Lagerlof, Senecal, Gosney & Kruse, James D. Ciampa, Pasadena, Jenny Kim for Amici Curiae League of California Cites and California State Association of Counties.


For a number of years, individuals throughout California were improperly charged taxes for internet access by their internet service provider, New Cingular Wireless PCS LLC (New Cingular), prompting various customers to file putative class action lawsuits. The lawsuits eventually settled, with New Cingular agreeing to seek refunds of the taxes from the cities and counties to which the taxes were remitted. After refund claims were denied, New Cingular (and various individual plaintiffs purporting to act on behalf of other customers) brought this action against the cities and counties.

The trial court sustained demurrers without leave to amend, finding, among other things, that New Cingular lacked standing to pursue refund claims against the defendant cities and counties. Because we determine that New Cingular has adequately alleged standing to bring an action for tax refund, we reverse, in part, the trial court's judgment.


Plaintiff and appellant New Cingular, along with plaintiffs and appellants Donald Sipple, John Simon, Karl Simonsen, and Christopher Jacobs (the individual plaintiffs), filed suit for tax refunds against 132 California cities and two California counties. Following the filing of demurrers, and after settlements were reached with a number of cities, appellants filed a first amended complaint (FAC) against 115 California cities and two California counties. The FAC alleged causes of action for: tax refund, unjust enrichment, money had and received, and violation of due process. Demurrers to the FAC were sustained without leave to amend.The underlying class litigation

This lawsuit arose out of the class litigation involving New Cingular. According to the FAC, the Internet Tax Freedom Act, 47 United States Code section 151, imposed a national moratorium on state and local government taxation on internet access. In its monthly bills to customers, New Cingular (an affiliate of AT & T Mobility LLC (AT & T Mobility)) erroneously charged its customers taxes on internet access over a span of several years and remitted those taxes to the defendant cities and counties.

Putative class actions were filed against AT & T Mobility and affiliates in California federal district courts by the individual plaintiffs on behalf of California consumers, alleging that they were improperly charged for internet access taxes that were then remitted to California municipalities. Similar lawsuits were filed in other venues throughout the United States. The cases were ultimately consolidated in a multi-district litigation proceeding in the United States District Court for the Northern District of Illinois.

The multi-district litigation was eventually settled, and, for purposes of the settlement, a series of subclasses, including a California settlement subclass with the individual plaintiffs as representatives, was certified by the District Court for the Northern District of Illinois. In approving the settlement, the district court found that the settlement agreement bound only the parties privy to it (i.e., the class members and AT & T Mobility and its affiliates), and that the agreement did not purport to dictate the effect of any state or local laws. (See In re AT & T Mobility Wireless Data Servs. Sales Tax Litig. (N.D.Ill. 2011) 789 F.Supp.2d 935, 983.)

Under the terms of the settlement agreement, AT & T Mobility, which was defined as including affiliates such as New Cingular, agreed to process and assist in processing refund claims in the many taxing jurisdictions in which internet taxes were paid, including in the defendant cities and counties. On behalf of the class members, AT & T Mobility was to file claims in jurisdictions in which it had standing to seek refunds of the taxes. The class members expressly authorized AT & T Mobility to file the refund claims. The settlement agreement further provided that in the event a claim was denied, AT & T Mobility would “cooperate in the appeal” and would “retain the right but not the obligation to appeal, otherwise contest, or further prosecute an appeal of any adverse ruling or decision in the event that Settlement Class Counsel declines to do so for any reason.” Any refunds granted by the taxing entities were to be paid or transferred to escrow accounts, and eventually paid out of the escrow accounts to individual class members. If taxing entities issued tax credits to AT & T Mobility in lieu of refunds, AT & T Mobility was to make payments in the amount of the credits to the escrow accounts, again for eventual payout to the class members. The settlement agreement imposed no obligation on AT & T Mobility to advance any monies to class members or to make any payments to class members in excess of the refunds and credits received from the taxing jurisdictions.

The instant lawsuit

Pursuant to the settlement agreement, New Cingular filed claims for refunds with California cities and counties on behalf of every person who paid the subject taxes in California, except for those few who opted out of the class settlement. The refund claims itemized the specific amount of the tax refund allegedly due each individual by each city or county. One claim form was submitted to each taxing jurisdiction; included with the form was a compact disc showing the names of the subclass members who paid the taxes to the specific jurisdiction, how much they each paid, and other relevant information.

The defendant cities and counties all denied or failed to respond to the refund claims. New Cingular and the individual plaintiffs then brought this lawsuit, seeking to obtain the refunds.

Fifty-five defendants (respondents) 1 filed demurrers to the FAC. Respondents argued, inter alia, that appellants failed to allege facts showing compliance with defendants' tax refund ordinances and failed to establish that they had standing to bring the action.

The trial court sustained respondents' demurrers without leave to amend. It noted that the FAC did not allege that any of the individual plaintiffs paid internet access taxes to any particular taxing jurisdiction, or that any individual plaintiff filed a claim for tax refund. The court found that appellants were “trying to press a de facto class action,” and it queried: “Can plaintiffs state a claim to obtain municipal refunds via the litigation efforts of (a) the vendor which collected and remitted the tax and (b) the four sub-class representatives appointed through a separate litigation process in federal court in Chicago to seek refunds for the benefit of the consumer settlement class certified by that court?” The court answered the question, “No,” finding [t]he vendor which collected and remitted the tax ... does not have standing to seek a refund when it has not incurred any financial loss because it has not yet refunded the amounts in question to its own customers before making the refund claim. At present, [New Cingular] is not out any money for the taxes in question as all amounts remitted to the several municipal jurisdictions were paid in full by the vendor's customers. [Citation.] [New Cingular] simply passed those moneys along to the governments after including such items in error on periodic billings.” The trial court also based its decision on its finding that local ordinances which prohibited class claims or required individual claimants to file their own individual claims were effective and not preempted by any state laws.

New Cingular and the individual plaintiffs timely appealed the judgment entered in favor of respondents.


We review the ruling sustaining the demurrers de novo, exercising independent judgment as to whether the complaint states a cause of action as a matter of law. (Desai v. Farmers Ins. Exchange (1996) 47 Cal.App.4th 1110, 1115, 55 Cal.Rptr.2d 276.) We give the complaint a reasonable...

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